What are Cognitive Biases in Stock Market Trading?

Cognitive biases in stock market trading are “patterns in thinking” that can influence how traders:

• Interpret information
• Assess risk, and 
• Make buy or sell decisions

These biases can cause decisions to rely more on emotions, prior beliefs, or mental shortcuts than on objective analysis. Some common examples are:

• Anchoring bias
• Confirmation bias
• Loss aversion
• Overconfidence bias, and 
• Recency bias

By recognising these patterns, traders can assess whether a decision is based on market evidence or influenced by a “preconceived view”.

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